Japan's central bank keeps key interest rate unchanged at 0.1 percent

Japan's central bank has kept its key interest rate on hold as widely expected but sharply downgraded its economic outlook amid an ever-deepening recession.

In a unanimous vote Thursday, the Bank of Japan's policy board chose to keep the overnight call rate target at 0.1 percent.

The central bank now predicts that the world's second largest economy will shrink a median 1.8 percent this fiscal year through March and will contract 2 percent next fiscal year.

But with rates already super low, the Bank of Japan has little room to maneuver on the interest rate front, despite renewed concerns this week about the health of the global banking sector

The World Bank welcomes the agreement reached between Latvia and the International Monetary Fund on a policy package to address economic and financial vulnerabilities in the wake of the global economic crisis.

As part of this €7.5 billion package (US$10.5 billion) supported by the European Union (EU), International Monetary Fund (IMF), and a number of multilateral and bilateral donors, the World Bank is ready to contribute up to €400 million (about $550 million equivalent), subject to agreement on a strong program of reforms in the financial sector and social sectors.

Citigroup Bailout Critical for Economy to Recover

Many people are wondering why Citigroup should get a bailout, and the Big 3 automakers were told to go packing. After all, both companies made bad strategic decisions - Citigroup in using too much leverage in buying mortgage-backed securities, and the Big 3 in not retooling for more fuel-efficient vehicles. Both have thousands of employees that will be laid off if the companies go bankrupt. Are banks somehow more important to the economy than auto manufacturers?

The next banking crisis on the way

Is this the quarter when banks finally admit all of their problems?

On Jan. 15, Citigroup announced it would take an $18.1 billion write-down on its portfolio of subprime mortgages and other risky debt, and the bank cut its dividend 41%.

With other banks following suit -- Merrill Lynch reported $16 billion in write-downs and other charges two days later, and Wells Fargo delivered similarly huge losses -- will they throw everything, including the kitchen sink, into their losses? That kind of quarter always marks the bottom in a crisis like this.

Nah. The banks and other financials have more losses from the subprime-mortgage mess on their books that they haven't yet confessed. Worse, the mortgage debacle has spread to other types of debt, with banks and other financial companies reporting mounting losses in their credit card and auto loan portfolios. And worst of all, the next big leg of the crisis -- the one I think will mark the true bottom -- has just started.

As the economy slows, the default rate is rising for corporate debt, especially for the high-risk, high-yield corporate debt called "junk" by many of us. That's opening a Pandora's box of potential write-downs that could dwarf the losses in the mortgage market.